After tax incentives dropped, car sales in China fall 38 percent

BEIJING, China: Data from the China Passenger Car Association released this week indicated that in January, China’s passenger car sales declined by 38 percent, reversing a 2.4 percent increase in sales during the previous month.

The decline is due to the fact that demand weakened after the end of a tax cut for combustion engine cars and subsidies on electric vehicles.

After a 90 percent growth in 2022, sales of new energy cars, include pure battery EVs and plug-in hybrids, also fell 6.3 percent in January, the CPCA said.

In an online briefing, Passenger Car Association secretary-general Cui Dongshu said, "New energy car sales in January didn’t meet our expectation, with a rare year-on-year decline in a single month sales."

The Lunar New Year and the end of EV subsidies contributed to the decline, he added.

The auto market in China, the world’s largest, is more reliant upon incentives from local governments to encourage purchases.

The Chinese government did not extend a 50 percent purchase tax cut on combustion engine vehicles when it expired at the end of December, despite signs of easing demand.

It also ended a more than decade-long national subsidy for EV purchases, forcing automakers, such as Tesla, to offer discounts.

Passenger Car Association data for December showed that new EVs accounted for some 25 percent of the total 1.3 million car sales, down sharply from 35 percent in November 2022.